Although investors can undoubtedly buy physical gold and store it in a home safe, the IRS strictly prohibits this in the case of gold (and other precious metals) purchased by the IRA. Section 408 (m) of the IRS Code defines what types of precious metals can be purchased with a self-directed IRA. Not all gold investments can belong to an IRA. The basic rule is that an IRA cannot own a collectible, and precious metals are defined as collectibles regardless of whether the investment is in gold bars or coins. Luckily, there are exceptions to the general rule for gold, silver, platinum, and palladium, which are held in specific forms.
To invest in gold with an IRA, you must follow two IRS guidelines. First, you can only invest in IRS-approved gold. While the list of approved options is changing, the IRS says it must be “highly refined precious metal.”. In addition, the IRS could regard storing gold from a gold IRA at your home or in another unapproved location as an IRA distribution, which could have negative tax consequences.
If you own gold or any other precious metal that isn’t tied to a self-directed IRA, you can of course store it anywhere you want. For example, gold bars must be 99.5% pure or better and silver bars must be 99.9% pure or better. The practical problem is finding an IRA trustee who is willing to set up a self-governing IRA and facilitate the physical transfer and storage of precious metals assets. Only a few companies are willing to act as trustees for self-governing IRAs that hold eligible precious metal coins or bars.
According to the latest PLR, the rules prohibiting direct IRA investments in gold do not apply if the gold is held by an independent trustee. So if your portfolio consists of both gold and paper investments, a loss on the gold side is offset by the gain in other assets. Setting up a checkbook IRA is complicated because you must be a limited liability company (LLC) and have a business current account, to name just two of the requirements. During his tenure as Director of the Mint, there was little demand for gold IRAs, according to Moy, as it is a very complicated transaction that only the most stubborn investor was willing to make.
Because the gold in a gold IRA must be kept in an IRS-approved deposit, you can’t store it in a safe, a home safe, or under your mattress. Gold IRAs are usually defined as alternative investments, meaning that they are not traded on a public stock exchange and require specialized expertise to be valued. Gold bought for a gold IRA cannot be stored in a home safe, a safe deposit box, a shoe box in your bedroom closet, or anywhere else besides a deposit, bank, or credit union. Once a traditional IRA owner reaches 72 years of age, the annual IRA minimum distributions (RMDs) must also be completed.
One option is to set up a self-directed gold IRA, which allows you to buy physical gold and silver with pension funds. Gold bars and round gold and silver coins are also allowed in an IRA if they have a fineness of 99.9%. As the price of gold rose to new highs over the summer, you’ve probably seen a number of ads recommending investing in gold via an IRA. The IRS has issued private letter rules to major gold ETFs, which state that IRAs may own the ETFs.
Therefore, the transaction is marked as a taxable distribution by the IRA, followed by a purchase of the metal or coin by the IRA owner (you). If you already have an IRA or 401 (k), either Regular or Roth, you have the option to convert some or all of your balance to a Gold IRA. Many investors choose gold to diversify their portfolio, either by investing in a gold IRA or buying the metal outright.